Revolving Credit Facilities, Term Loan, and the Notes | 9 Months Ended |
Sep. 30, 2013 |
Revolving Credit Facilities, Term Loan, and the Notes | ' |
Revolving Credit Facilities, Term Loan, and the Notes | ' |
4. Revolving Credit Facilities, Term Loan, and the Notes |
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Credit Facilities and Term Loan |
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On March 29, 2013, the Company and the lender syndicate amended the Company’s credit agreement dated July 14, 2011. Among other things, the amendment served to (i) significantly reduce the nominal interest rates applicable to principal owed by the Company and (ii) extend the maturity of the $30.0 million revolving credit facility. |
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The amendment also served to modify the lender syndicate supporting the Term Loan. For financial reporting purposes, the Company treated the transaction as a modification, as the present value of the cash flows did not substantially change. |
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The Company incurred costs of approximately $1.8 million in connection with the amendment, of which (i) $430,000, representing a 0.25% discount paid to all members of the lender syndicate, and (ii) $1.1 million of debt issuance costs paid to creditors have been capitalized with respect to the Term Loan and will be amortized along with previously unamortized amounts related to syndicate members. Third-party debt issuance costs of $260,000 were expensed and are included in selling, general and administrative expense in the accompanying unaudited condensed consolidated statement of operations for the nine months ended September 30, 2013. |
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The amendment reduced the Company’s minimum rate on LIBOR borrowings under the Term Loan from 5.75% to 4.00% (the latter comprising a LIBOR floor of 1.00% plus an applicable rate of 3.00%). The LIBOR floor was reduced by 25 basis points and the applicable rate was reduced by 150 basis points. The July 14, 2018 maturity date for the Term Loan remains unchanged. |
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Prior to March 29, 2013, the Company made principal payments of $525,000 at each quarter’s end. Under the amended Term Loan, the Company made quarterly principal payments of $430,000 through September 2013. Subsequent to that date, the Company is no longer required to make these principal payments due to its voluntary payment. The Company continues to be subject to requirements to remit additional principal payments in amounts equal to (1) 50% of excess cash flow (as defined in the amended credit agreement) as determined annually, which percentage will be reduced to 25% if the consolidated leverage ratio (as defined in the amended credit agreement) is equal to or less than 4.25 to 1 but greater than 3.25 to 1, and 0% if the consolidated leverage ratio is equal to or less than 3.25 to 1, respectively; (2) 100% of net cash proceeds resulting from dispositions or casualty events if such proceeds have not been reinvested within one year after the occurrence of the disposition or casualty event; and (3) 100% of net cash proceeds from issuance of debt or preferred stock not otherwise permitted by the amended credit agreement. |
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Under the amended revolving credit facility, the maturity date was extended from July 14, 2016, to January 14, 2018. The interest rate applicable to future borrowings, if any, was also reduced from 3.5% to 2.75%. At December 31, 2012 and September 30, 2013, the Company had no outstanding borrowings under the amended revolving credit facility. |
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The covenants in the amended credit agreement continue to limit the ability of Crown Media Holdings and certain of its subsidiaries to (1) incur indebtedness; (2) create or permit liens on assets; (3) make certain dividends, stock repurchases and redemptions and other restricted payments; (4) make certain investments; (5) prepay indebtedness; (6) enter into certain transactions with Crown Media Holdings’ affiliates; (7) dispose of substantially all of the assets of Crown Media Holdings; (8) merge or consolidate; (9) enter into new unrelated lines of businesses; and (10) enter into sale and leaseback transactions. The amended credit agreement also requires compliance with a maximum total leverage ratio test and a maximum total secured leverage ratio test, but permits, with certain limitations, certain equity contributions to be made to Crown Media Holdings to enhance its ability to comply with such ratio tests. |
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The amended credit agreement contains a number of affirmative and negative covenants. The Company was in compliance with these covenants as of September 30, 2013. |
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At December 31, 2012, and September 30, 2013, the outstanding balance under the Term Loan, net of unamortized discount, was $187.6 million and $154.2 million, respectively. The Company made principal payments of $525,000 and $15.4 million under the Term Loan during the three months ended September 30, 2012 and 2013, respectively. The Company made principal payments of $19.1 million and $33.2 million under the Term Loan during the nine months ended September 30, 2012 and 2013, respectively. |
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Interest expense under the Term Loan was $3.0 million and $2.0 million for the three months ended September 30, 2012 and 2013, respectively. The effective interest rate was approximately 6.3% and 4.87% during the three months ended September 30, 2012 and 2013, respectively. The weighted average nominal interest rate was approximately 5.75% and 4.00% during the three months ended September 30, 2012 and 2013, respectively. |
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Interest expense under the Term Loan was $9.2 million and $6.9 million for the nine months ended September 30, 2012 and 2013, respectively. The effective interest rate was approximately 6.3% and 5.39% during the nine months ended September 30, 2012 and 2013, respectively. The weighted average nominal interest rate was approximately 5.75% and 4.69% during the nine months ended September 30, 2012 and 2013, respectively. |
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Interest expense under the revolving credit facility for the three and nine months ended September 30, 2012 and 2013, was $0. One letter of credit was outstanding in the amount of $202,000 at both December 31, 2012, and September 30, 2013. Commitment fees on the revolving credit facility are payable on the unused revolving credit commitment at the rate of 0.50% per annum, payable quarterly. Commitment fee expense for each of the three months ended September 30, 2012 and 2013 was $38,000, respectively. Commitment fee expense for each of the nine months ended September 30, 2012 and 2013 was $114,000 and $113,000, respectively. |
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The Notes |
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On July 14, 2011, the Company issued the Notes in a private placement conducted pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The Notes are guaranteed on a senior basis by each of Crown Media Holdings’ subsidiaries (the “Guarantors”). |
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Commencing January 15, 2012, interest on the Notes became payable each January 15th and July 15th. The Company is not required to make mandatory sinking fund payments with respect to the Notes. |
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The covenants in the related indenture (the “Indenture”) limit the ability of the Company to, among other things (1) incur additional debt; (2) pay dividends or make other restricted payments; (3) purchase, redeem or retire capital stock or subordinated debt; (4) make asset sales, including by way of sale leaseback transactions; (5) provide subsidiary guarantees; (6) enter into certain transactions with affiliates; (7) incur liens; (8) make investments; and (9) merge or consolidate with any other person. |
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During any period in which the Notes have an investment grade rating from both Moody’s and S&P (at least Baa3 by Moody’s and BBB- by S&P), and no default has occurred and is continuing under the Indenture, Crown Media Holdings and its restricted subsidiaries will not be required to comply with the covenants in the Indenture that limit their ability to (1) incur additional debt; (2) pay dividends or make other restricted payments; (3) purchase, redeem or retire capital stock or subordinated debt; (4) make asset sales; (5) provide subsidiary guarantees; and (6) enter into certain transactions with affiliates. The Company was in compliance with these covenants as of September 30, 2013. |
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Interest expense under the Notes was $8.0 million and $8.1 million for the three months ended September 30, 2012 and 2013, respectively. After giving effect to the amortization of associated debt issuance costs, the effective interest rate of the Notes was approximately 11.0% during the three months ended September 30, 2012 and 2013. |
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Interest expense under the Notes was $24.1 million and $24.2 million for the nine months ended September 30, 2012 and 2013, respectively. After giving effect to the amortization of associated debt issuance costs, the effective interest rate of the Notes was approximately 11.0% during the nine months ended September 30, 2012 and 2013. |
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Maturities |
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The aggregate maturities of long-term debt including estimated future interest for each of the five years subsequent to September 30, 2013, and the period thereafter, are as follows: |
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| | Payments Due by Period | |
| | Total | | Year 1 | | Year 2 | | Year 3 | | Year 4 | | Year 5 | | Thereafter | |
| | (In thousands) | |
Notes, due July 15, 2019 | | $ | 489,000 | | $ | 31,500 | | $ | 31,500 | | $ | 31,500 | | $ | 31,500 | | $ | 31,500 | | $ | 331,500 | |
Term Loan, due July 14, 2018 | | 186,465 | | 6,332 | | 6,332 | | 6,350 | | 6,332 | | 161,119 | | — | |
| | $ | 675,465 | | $ | 37,832 | | $ | 37,832 | | $ | 37,850 | | $ | 37,832 | | $ | 192,619 | | $ | 331,500 | |
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Guarantees |
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Because Crown Media Holdings has no independent assets or operations, the guarantees by the subsidiary guarantors are full and unconditional, joint and several, and there are no subsidiaries of Crown Media Holdings that are not subsidiary guarantors. With certain exceptions described above, the Indenture and the Amended Credit Agreement impose restrictions on the payment of dividends by Crown Media Holdings and the subsidiary guarantors. |
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